Culp (CULP) 2 Dec 212022 Q2 Earnings call transcript

Good day, and welcome to the Culp Incorporated Second Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask question. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Dru Anderson. ahead. go Please

morning. to Good quarter to Culp the fiscal Thank the And Company's call review second results conference XXXX. you. welcome for of the

contain that As and condition, the morning's me start, of about state we call business, let prospects will forward-looking Company. financial statements the this

the that, beliefs differ performance are statements of not Forward-looking or historical statements materially because of are or uncertainties. in including statements by Form-XX-Q. These risks events fact. filings our filings, include and that indicated various risks and future are recent forward-looking actual the statements of could SEC Company results, from Form most expectations, The projections, and about described the or XX-K on otherwise uncertainties Company's regular

not made place forward-looking no speaks to such statement obligation on reliance revise today to as or each forward-looking cautioned of We statements only undue statements. to You today. undertake and are update

turn Officer A Chief culp.com. call Company's and website sir. now supporting Please Company's information, summary call and over the addition, financial also President presentation measurements the to of Company's the filed the reconciliation the at Company this discussing to tables Culp. Culp, Executive available most press measurements. as are of A the be will directly included financial slide comparable non-GAAP call. go the will included yesterday, to today's an I in In the with on exhibit part measurements during X-K GAAP as is non-GAAP Iv posted website financial the on of release, ahead, webcast the of to financial

Officer, like analysts today Boyd to Culp for Chumbley, business. President With on and you our quarterly Bowling, Financial and conference of the and call would morning, thank us you with Fabrics joining the Ken Chief the today. Upholstery investors. me our call are welcome Good to I

quarter. segments. after I will strategic each review financial on review you will and comments, fourth will fiscal the the I our Ken results for outlook Ken XXXX. then with actions business call And begin operating the third that, today, will the then for of update For the and our quarters in some opening of

be will some questions. to then We take happy

second costs. primarily upholstery by announced, in Several sales lower-than-expected constraints our results and results for factors reflected global kept the the COVID-XX situations, labor the in of valued quarter of components. our months I'm our rise last our a affected how remains sales, XX external customer chain pace continued pressured and fabric -related supply chain for build of Vietnam As the the environment responded demand with that associates delivery over also has Profitability proud in needs our and met raw for supply challenging macroeconomic segment. the quarter, freight, to particularly extremely robust businesses for non-fabric shutdowns Despite our previously both rapid our material, customers. platform more and have

our customers new in have and of their Looking we planned the industry do are have in shutdowns costs but the product delayed throughout rapidly rising supply pleased continue, and rollout chains the been Vietnam launches. the our ahead, lifted, disruption that many previously

for believe to to also purchased backlogs support were their excess many products cover issues inventory they that as We for subside. fabric customers and that wait expanding supply have their chain

through could levels. it As their for inventory cover fabric some expect take work we result, a time and existing customers to

once lower pressures existing in causing from have that are leading to backlogs. some of customers new some some peak inflationary demand levels also last their fulfill concern year, business the We slowing

meaningful pressure we headwinds we our results this especially into third rebound the the continue the But on year. see half business fiscal to will expect the second appears pre-COVID Although the to continuing year, Based and demand a high remain next fourth fiscal beginning quarter. levels. during comparing of during factors, in quarter to current when in expect these to

with chains, very reserves, are and stronger growing and supply innovation well delivery strategic positioned result opportunities inventory strong performance. We of as our a

some the we expect which third supply fourth if to customer in this expectations fiscal improvement strong levels for fiscal XXXX. meet as significant period. year, full disruption, of by chain pre-COVID sustain sales XXXX the fiscal quarter a compared seasonal and quarters, we our also is We fourth and gains, Notably, the traditionally year, for of will

increase to cut will actions third offset expect this pricing which do upholstery inflationary quarter current capacity quarter, are and open facility during the We sewn to our for also and we during pressures, help further our Haiti implementing third new kits.

feedback positive supply to are we continuing regarding our future customers our of competitors, value record, our together and will Our continue quickly competitive long-term which customers. relationships, needs to delivery frequently evolving hear from our support advantage, strong respond the the that to allowing belief provide our growth. with chain supporting distinct us our our supplier to does platform of global a We outperform

We for of designs are some has remained also in Point, cover. we new strategy. recent North products well customers, extremely been of of fabric received to in from product-driven hands-on, our opening and them innovation businesses, innovation a on creative viewing both The our in campus Carolina focused with by the our High and first-class our our scope providing experience confident Downtown

annual pleased Our that remains again extremely we once of year the I'm increases. our increased have balance this making dividend, consecutive and dividend solid, sheet Xth

to will review with support the to And we current opportunities Ken, call the in beyond. XXXX have over business shareholders for to we environment. in and for I deliver the value our quarter. strength financial results And turn who our customers, that, now employees, the and the to financial will the forward fiscal look Importantly,

Iv. Thanks,

have that our mentioned earlier performance strategy. posted call, capital slide Relations posted the we to measures. our on As website allocation key presentations We've also Investor cover

$X.X operations I'll million from the compared highlights Here Net X% detail per with reported compared X.X performance more second per and of million the sales prior-year operating prior-year for net second were $X.X income share Company financial million $XXX,XXX period. Net sales operations down from income the compared moment. period. are on quarter. The of income share, for $XX.X $X.XX the in the divisional the for with diluted diluted in with a period. income million or prior-year for or quarter was comment $X.XX of

of months trailing XX.X% with by offset SG&A XX SG&A period operating due a basis, performance reflecting expense. for a year-over-year net improvement by was Trailing was $XX.X mainly the came same period lower accrued the same The for year the income XX total or in primarily, Consolidated sales sales for ago. adjusted XX.X% compared U.S. million among quarter, of higher of to to capital Our several pressures period XX.X%, return exchange headwinds, at compensation XX.X%. million on expense $XX.X were this %. These effective to fiscal for a for Canada, XX.X% material sales quarter rate the last overall factors. net year XX-month or of labor partially tax year affected was a the and in compared EBITDA X.X% second percent raw fluctuations, X.X% incentive foreign was lower of lower same year, other inefficiencies sales, the due, the shortage unfavorable costs, total On ' period ago. and and for freight rate to compared

foreign taxable over fiscal to that tax income rate. China and located our have are compared which affected year higher income as Our of effective the earned mix income rates U.S. the federal by by is mostly in subsidiaries Canada, rates the tax

range, tax the based effective this currently income those in circumstances quarters. The tax ahead and estimate Looking vary facts rate for on based on our we that year, income to fiscal to quarters consolidated the facts the specific third fourth XX% will know be rates XX% period for the rest we and the annual of could today. the for

Fiscal we payments Additionally, cash currently $X.X for million projecting income approximately are XXXX. of tax

this for the cash the changes and capital of of associated projections, can placed will only as China service, in our actual income in current the timing the rates earnings significant to when depreciation. China affected foreign foreign are in exchange our in management's projections relation dollar, deductibility Importantly, projects versus the determines our well subsidiaries with U.S. be which And as accelerated estimated operations, the located by be Canada fiscal year annual tax year over from payments

Now, take segments. business at our a look

X.X% $X.X a implemented surcharge are margin second million, offset was fabric mattress $XX.X the The last with fiscal we period, year the compares sales China million operating compared foreign facing. income as prior of quarter, and year shortage Operating quarter for freight, higher of segment by were XXXX XX.X% due price negatively the a up year's performance currency and labor income primarily ago, million, ongoing portion compared affected current helped with a in to compared raw an second U.S. For with ago. year labor the us to was $X.X quarter. Canada. for the Operating costs, half first with and pressures in inflationary and the have Canada, increase and freight unfavorable inefficiencies fluctuations of material, during X.X%,

well on the to However, on of that limit immediately market from performance we if need continue operating effect competitive near-term. operating price pricing as our may all to are And stabilization increases, actions as consider pressures in the in cost rise. lag passing us our expected to further continue costs

with in by income a Haiti Window was year. We fabric the costs second $X we $XX.X freight to rapid the this an to during from increase compared compared for quarter million for foreign in operating pressures. surcharge down contribution sales our due X.X% was third in Read $X.X cost, margin an lower the Products offset are a China, cover costs, fluctuation quarter continued portion residential Operating freight million additional inflationary these X.X% affected well rising our help the operating business, of ago. quarter were our with to during facility, the performance freight year ago, year segment, of second instituting increase lower prior For sales for as material implemented new business. X.X% cost, unfavorable quarter price but higher help a and currency primarily startup our over with million a upholstery Operating as income

negative $X.X of months of respectively in sheet $XX.X and of million borrowings the the debt $X.X and We no operations as no cash flow $XX.X investments outstanding outstanding for and and million end first negative flow million last balance the million in and at from reported cash cash total total the X were the fiscal Here compared highlights. of and year. the free with year. quarter, end investments Cash

operation, $X.X first holiday. capital campus. our expenditures, to IT we inventory business, our with As cash: position new this equipment, to the following to return material to the expenditures Year the raw our continue Haiti our terms innovation operation in free machinery, in and ahead our support of cash rising payments Increased expenses payable fiscal in payments, customers, million material uses well normal credit -- by the the including our investments granted, opposed cut million in $X.X expenditures in as flow of and during upholstery for affected and to associated rising accounts lease half for building startup year the operations to and previously to pandemic. were ahead investment in-stock sew cash invest extended our and COVID-XX and flow costs, as of response related improve as valued related to Chinese new increased purchases of terms, to get strategically New from

on dividends of Additionally, and paid quarter months X repurchases. this we share year, during fiscal million regular the million $X.X spent $X.X first in

XX,XXX we're our in we utilize capital third Balance will our expenditures, we I and While to quarter. cash lower to at is investments continue going current operations quarter Company for the Sheet that expected important of in the of approximately capital, second for uses second outlook to of share expect cash repurchase of pleased end shares during note it the the investments to stock end million Iv. our Based total quarter, the under the With and compared the repurchased our $X.X of increase The investments working be located planned that, our fiscal quarter, available will over by year, strategic half into with cash on in leaving and this back program. business Haiti. fourth to our to solid turn current quarter, as third the end but call of second approximately common the the

you, Thank I'll business. fabrics mattress begin Ken. the with

orders launches our for customer sales fabric line was constraints and mattress mattress While those for existing were some caused inventory covers. by somewhat revenue delay working in second product levels fabrics through expectations, our into while chain new some for quarter and and components our affected with customers the temporarily limitations. subsequent taking pushed supply to This non-fabric quarters

challenging we by service expect of alleviated environment relied we Despite to our during the strategy and design quarter, focus product-driven sourcing creativity manufacturing medium-term. the resilient a However, our on the platform of on will with the and utilization supported over the customers. be needs pressures innovation, these our

well Our a remains onshore, strategy, chain customers. nearshore, sewn mattress as for platform, our preferred and our especially fabric-to as cover offshore model supply - cover

with Looking profitability, continue Rising for but to control costs ahead, placements remains improve strong our pressure mitigate new fiscal actions pricing internal inflation. market take remains position XXXX. reasonable manage our costs, solid, product efforts our committed to ongoing and to developments to efficiencies, and team and

normalize. chain and to to advantage further we well-positioned model expand competitive sustain our as market customer disruption, leverage Especially supply Over to term, our reach. positions the inventory long business are begin compelling and our our

comments I make few a fabric the upholstery Now, segment. on

were by also quarter, of reduced encouraged at largely the our of business, by business. ability orders. fabric customers lower significantly to related our business, residential sourcing Asia. were our limited driven results the by ship sales These to pressured our the within U.S. of which longer in Hospitality business were instead lasted in quarter. second short-term, constraints, outside our Despite due shortages labor quarter fabric our the we contract and most facilities, in ability COVID-XX chain Vietnam to significantly second hospitality prepared partners both than and ship supply recovery be ' were sales Residential orders in headwinds our during and but disappointing, anticipated to shutdowns Residential led and shutdowns Our our by throughout their our customers expected

last and have now capacity. during we quarter. We're are normalized We quarter at the of in the resumed also and saw partners month Read our customers a sourcing measurable Products Vietnam during improvement pleased that the affected Window shutdowns business lifted, the shipping our

for production expect kits, complement risk, which that will we expand at and capabilities upholstery Additionally, capacity to third Asian new platform. quarter, some Haiti strong facility mitigate our near-shore our begin during the and cuttings our with

and conditions, expected and as strategy fourth the remain well and Ken offerings, relationships, furnishings and changing slowdown lingering all, our ahead, the for for year our demand customers. in flexible support fabric Looking our the long-term meeting from fabric levels Above fiscal discuss valued an some the third Showtime our we'll take of we favorable customers business constraints needs of while focused fabrics. upholstery remain post-COVID our there popular customers will the there believe Asian residential where business. now is general trends on market, outlook is as surge. experienced, supply favorable products, to well-positioned Performance our received for in LiveSmart new we questions. near-term are chain of and inventory this platform, and for Also, the our home our Haiti. industry, existing challenges, related the from these expanded strong capacity encouraged the our recent business products our also term, stay-at-home during long reaction We're the supplier peak by product in quarters including despite of with product-driven But external portfolio innovative

rates. We macroeconomic and disruptions continue exchange challenging inflationary to foreign uncertainty related supply navigate fluctuation environment customer non-fabric components, for pressures, in market, currency to chain a labor the in significant

platform, and the second Although current especially the to year with this product-driven pressure we of term expected results throughout continue our during quarter. long are global over the strategy are fiscal flexible well-positioned third the headwinds half

quarter. to by lack the have new a inflationary fourth and changing third reminder, Due the chain visibility current until the fourth third the magnitude the for begins Year the As and of previously withdrawn duration will the to and continues our quarters and environment and disruptions annual uncertain beginning have the which the related only for of to holiday, stabilizes. the end volatility customers the third of uncertainly year and supply the of of be fiscal of quarters rapidly provided Chinese the of affected guidance environment, fourth and outlook into issued quarter coronavirus, the a impact relating the this limited also at New timing we Omicron

of expect to operating a for fiscal year. this sales fiscal we fourth last the the be and operating as quarter net this both quarter in compared quarter year, for year, We sequentially and quarter income of this improvement this expect income the sales the the compared comparable fiscal consolidated as net fiscal our to quarter second to third strong year sequential of year, third and to fourth fiscal

fourth our their in of chains, the supply traditionally Our our the for fourth fourth from solid will this and more fiscal for rebound and headwinds. time strong as scheduled at this well and the available quarter. pricing placements, customer the and recognition anticipated and us in adequately and Company's seasonal that, of assumptions business our comes cover regarding confidence management actions the Notably, year in customer in certain reflects on by positioning levels, of expectations our this expected call in trends a the chains, as the third supply ongoing quarter, impact improvement are quarter strategic release quarters inventory information based projected with of timing

expenditures capital million $XX.X based range. to are to in $XX.X fiscal current expected be this million on Additionally, the for expectations, now year

investments capital Our focus will

fabrics strategy With corporate that, new amortization North well IT with million Depreciation our level, Windows your in business in of fiscal Point, we for $X.X ongoing and take as maintenance year. $X.X will will expected campus investments now spending investments security, infrastructure questions. Carolina. on to the in as as spending include upholstery approximately to and innovation mattress CapEx be High our are this new million well in startup. and Read business, in CapEx centered Haiti our our fabrics At as

question-and-answer from Sidoti We comes The question Lebiedzinski will go ahead. Please begin session. first Anthony Instructions] [Operator and the now Company. with

Yes. thank questions. taking Good morning and the you for

the you So, a guys I did different know good overview of segments. pretty X

can a going just on to that better basically of your with launches, we of asking It sounds it shipments. hold some wanted product new if get shipments. customers see is understanding on something's Just like, to off timing shifts the of are

understanding to the that the if -- a outlook. just us X, issues wanted just just give could separate the you back half better -- are surrounding of just timing So -- the of

let are I'll Iv. This two Yeah, and it's you It for the is between nuances some good thank there too. -- businesses. certainly question -- the Anthony, chime is ad start in morning. Boyd

So, fabrics In planned to built product as to is capacity expand excellent. of New meet But built also your in surge our had question customers strategically the levels Year. some we've Chinese some upholstery in business, advance preparation up inventory we of up demand.

in our has chain keeping lead we've what cases, supply So, better more with our times seen fulfilling some are today. demand. market up and normal And been

capacity So, degree, would the delay be cases what up in we're that haven't shipping why is there. to add that some prepared some to And Boyd, seeing in the to. of we're increased some a at caught deliver may to you of levels of normally little to customers want

No.

covers the Vietnam of very the see and coming discussed, then sew happened with with shipping we operation of pattern I business back certainly year But think, we've our here. quarter. now we well portion as our Cut-and-Sew on on cut the business well. stream, that second the of on what's -- capacity fully second now the that, from more normalized that And half as Vietnam now on with the disruption Haiti fabric the for there. restored being the And business in to had additionally side

normally would when improvement fabric that, QX. tacking of I to of year the spend mattress -- from then QX supply try chains into be mattress often expect January. a talk rollouts those some around demand of keep fabrics, sequential for rollouts, with you sure of lot some, mattress ramp current new Because expect in would in will we later. And Normally or up fabric just in upholstery think, -- expect dealing should of in delivered, strong to where about just To we mattress we orders Anthony, fabrics see that and especially QX the the end are covers. in some to QX, product we the and pushed calendar we business making being QX target and onto can our and

to So can't that it's I this businesses, case, deliver. till improvements But we've some it that's prepared. improve our quarter-to-quarter. mattress guess feel a both it able why all not QX, customers in may in it's fabrics QX. In is little through to is slightly start different. we're a because while pull different to that And Upholstery

Got it.

a that little at levels. you I then, you guess, explanation. Okay. above And a But that demand levels? -pandemic ago bit expect seeing versus demand to assume overall just it guys a Thanks it year from for moderation perspective, sounds of maybe are is still an pre like safe peak

an has have somewhat more at fabric acutely still peak we an Anthony. We in some a It's were is mean speak Iv, production last about seeing new high on because pre-COVID as is compared strong backlogs. we time, in of is support they're we just that we work more business level the and Yes, we really is backlog, This customers shipping place. everything that levels, customers to That's to to nuance pointed as the we ordered this capacity compared level response important the quick, a we high not believe, When feel to we a to but orders talked The had think that's through working subsided levels fully excellent increased question our cases, the and as stay-in-home that were year. had little say that, industry. from our too, now, entire they're again. really, about boosted, in slowing, peak and last year was very out you slowing. sales as it about when at

lead our most at really solid has again, a times. issue. timing and So, chain been And normal it's now of our supply are backlogs

it. we just again, timing So it's deliver start can to when on

the order level, business. long-term continue which trend our in supporting So generally, see we do positive does

Got it.

for as third give third last the question magnitude for planned that it quarter to price far that you're the you do? can just the Or quarter? as are me, both And is the And fourth planning? Okay. us of increases, increase they and price planning for the you're

Yeah, Anthony. Ken. This is

impact around so QX, at look that's total all I'd you now or say the total of far, X% cumulative sales. If -- the of done increases the income we've impact or so

And do you rest so, year, in, over those when coming look are of time. at the to we have the of more the period going but accumulate

course, So, at it's third we But be I to end staggered. higher to in times, be going by different time be than all of are the today. of that so guys, think But point. in at the place they come will are going that the quarter, they they

Yes.

thank All it. forward. much best Okay. very Got right. luck of going and Well, you

you, Anthony. good Thank day. a Have

with Budd Tower go question comes next from Please Water Bugatch Research. The ahead.

problems before was customers could maybe Boyd. Iv, some morning, get different of you for the segment, time is, your they Can it that -- could, time I the us and quantify quote you work Ken, I they fabric Iv, had -- maybe inventory. -- the think -- your -- give what it's by an get would and idea that think I'd I through you is? your it to probably -- you think if you guess, additional to like Good that that take said through

think about seeing we Yes. rebound QX, sure, strong I really, some time, mean but a for trying obviously, We're for we -- a we talk it the just starts when little good we're when question. we to but spend. tried hesitant be

we So, be and into it's think long-term year. next not then it's QX a heading thing, could

Okay.

both In businesses.

sorry? I'm

rebound the continuing of through In both rest for both be businesses, the QX, and strong mattress for will And year. first then the although fabrics.

I to quarter let operation? quarter, would had? kind have And had you that Would put you Vietnam what during would but of Haiti unfair, If all probably the for have -- don't what been question. impact -- a a be second maybe the it -- how done you. difficult -- it's for me of have -- mean Got online your second

facility that, of place Boyd. the QX. There some could is as that and being in to course, We have the that Certainly we production production is in Budd. of to certainly we But in Yes, delay China Haiti would in disrupted an been were coming stream. operation a the which able had some This of been of that had online Vietnam really had if have would no have helped shift some on back that coming the we facility was shift has planned. time. by to operation, opportunity COVID. to disruption shipped We potentially period to the Vietnam for Haiti saw regards of earlier,

that supplying, So, well. But fully if some of time have capability taken been certainly cutting we situation without advantage sooner, weren't we period. kits during could yes, had Haiti available that of as

cost supply because some the why it's -- place. have impacts Boyd, we back just that at with chain, And for of came -- you your the -- analysis to that in here, tariffs and was what been Vietnam a Budd's the for to shifted of to China an the moved Xst but statement amazing

was correct. costs. in is the Right. That That

that Okay, makes good sense.

terms seeing of are increases we you're are going weeks now? seeing seeing in the rate or it of in inflation, now the and you increases we're and what that believed the in -- was Or I is anybody chairman status is transitory from? time, business couple think for of coming additional about One of retired words been the moderation of talking the transitory inflation has the any on? some last Are don't where of [Indiscernible] in what the price but orders by that apparently

inflationary is see We've from recent the speak again, upholstery an environment. additional seen to I'll the Budd, business. first increases weeks. additional fabrics this in And continued to Boyd regards increases in we have certainly

continuing related raw material are that costs. pressures inflationary are there to So, emerge. and energy recently costs to Most

your costs, So, answer there costs likely seen see additional ongoing peaked, we freight, yeah, cost I we've to as those inflationary think inflationary are have question, to continuing pressures. such pressures. are but, Other

Okay. sounds seem if the like in production. you're energy, But -- that's of factors they -- that talking about

would seen period that's far So, they I suspect. on probably we're probably our well. a chain economy things, way not and that I the too from peak, over peaks and through a time. factoring of supply if peak a freight have those away as mean, you've of

-- about being optimistic? it So, way way am too be would that I or to the right think

think we're of right I and we've been just in volatility uncertain from that an lot there's week-to-week. now, environment a month-to-month seen but

how not with pressures, than we are we'll I'm to time the to a seeing that the whatever as -- think just accordingly and at other there's are sure occurs. continue taking cost necessary respond about actions yet, these So, we

QX we production labor inefficiency North has higher fabrics, mattress so shortage being an what's we're labor. shape able we've of at and significant more much thinking we're about have improvement the efficiently. about think in been those a probably stronger I train Raw hope one and -- that might Yeah, materials a I most labor news costs. as do peak like good The are you're it Budd. that with in get to And worry We to of inflation you American the past, In we've impact are labor and the I thing it. some much of operate right the strong not that's in impact Because had much in is, add certainly, there about better know level sure. position. side to And we're just us labor an new one the is middle Boyd, from more we of have of more on But get associates have rates. I'll costs. mattress totally a Hopefully, our impacted freight. we

of be higher be even labor efficient to efficient that labor at there, starts a rate, part leasing rate an big of and -- business. having an will us somewhat the that to help pressures some the limit force will So

people can been shortage you Are two it six of to weeks versus you weeks ago.? four ago, be -- where shortage Yes. being get of lot in from you ago, -- was terms now want terms able your they've what's to appropriate you heard the where Are Or associates. -- quantify? weeks a that force? are of in maybe labor We've

significantly where ago. is Yeah, six I was from improved mean, weeks it drastically it

or not replacing shifts. the now lot We've that can biggest but the efficiency. have We're makes big operate a a a That So, to area in great a for where jobs just way open, off filled, where difference our success problem job night nice, which we place equipment, refilling a the especially had we're we whatever was. was job of our engagement. all reason our great done on were found recruiting, of and

Great. highest being you've I different I level up last I the a the are guess year-over-year, Company now when or last decade discipline, seen been the late that. understand inventories for that that me, over the not can of kind noted like $XX for Company I an that as run was guess, since XXXXs, more. million asset-light with I've

other that of about guess might, finished inventory any I risk? whipped, is is at too. So, material. that, and raw And investors worry I it goods, is it

Yeah. the jump can I -- Iv, I'll and in but end. this you at can't -- begin,

finished New good. the it I buildup, Year. All think, -- as far as customer-related pushing that's getting of part been ready this I think pointed is mean -- Chinese out. has I for I I back, customers

upholstery finished all these of fabric We so, any have ahead have there I side for increases periods, price it raw increased it, Iv, recent the those the don't in materials mattress of exposure far goods. any in exposure our we been both as to see that is is so preparation increases business Yeah, more believe get sides but there's don't side -- the of as on

Yep.

raw And have purchased of New materials ahead side, cover direction expect make that we Chinese knit of a get of -- yes. any in the ready we for or weave, and of that pulled. mattress customers out capacity been pressure prepared the pricing our can expanded in on or lot It's to get advance levels Year to. a

upturn like market. the an that's a position positive poised for in feels it So,

on a Yeah. are of inventories lot really of the higher days companies And focusing we've these -- because uncertainty. just

So, turn in the from we standpoint feel to and good are fourth quarter. expecting that that

be everybody's And you which back or the today seems of about the last inventories talking more Because I people supply less because Okay. for something think but about to we've in moving about two they experienced having than quarters, are -- "just era go chain. now to past. of are time talking do supply having mean, inventory, inventory worried additional pockets things " the now,

would would that million, how much down? draw So about you think $XX

of course, time, it think again, you from think Yes, Ken we take mid-fifties. million And quarter, think that one year I the the looked in is fourth out then a the $XX at and we there, I was think this that. of I past for At low. chunk sizeable over last can year, big, was I think, I XX, think

customers going don't but it are we're I think it would what higher as forward, at obviously stay far little think I looking that the I doing, bit know, our than on as uncertainty normal? Boyd, a depends

Yeah.

we and our think our feel throughout service certainly. time has for volatile certainly that this been reliability for an strongly us. And advantage period service I reputation

in what think exceptional of to at inventories be I strategically past, customer certainly versus our we did able we yeah, as as service a number strategic So offer look it to advantage see we to base. years our continually now

-- So

I understand the sheet advantage. that piece I the think you've balance with think of I stronger Culp. think and reputation that is because -- that, of I And have you got

the on luck good forward again the you look I So to quarter, third to talking and fourth shortly. and

Thank you, Budd.

next Marco from Rodriguez comes go Stone question Markets. with ahead. Capital The Please

Good my questions. Thank for you morning, taking guys.

Marco. morning, Good

demand, levels, outlook Hey, headwinds little second wondering we out about that -- supply-chain that low maybe I can year, at are was the a a issues pulled talk you've can inventory you guys. few customer customers. inflation remarks. prepared in you impacting the the had high the of your Obviously, and half if

ary improvement, the What you talk chain be soon. pressures and light in QX you giving So, to for little guidance bit a issues a temporary supply of QX, the that maybe understand can if I inflation sort of expectations strong But rectified that. are less than improvement? don't QX anytime seem above confidence for stronger for there if your

a to, we've Marco, a throughout. anyone, historically. suppliers, or it's question. comes if being we've or going touched It we've also And to Thank good spoken seasonal strong, you, to investors, then And question and QX a been of to on timing a down come back as customers And saying question. strong and it's traditionally it's internally, lot period about something is a when. talked not really we've

supply do chain, this locations, in few think production outperforming our new times, solid we're Boyd we And a the opportunity. mentioned competitors and terrific delivery. built that's all a got hear as we've we time and driving So,

more. things. with up have I so in that and So, think covered operating in more capabilities, be boosting business of in fully good QX, combination and some be We'll will onshore, supply we really some chain for businesses offshore upholstery of much near-shore, both our about and the costs to operational kits, ramping We'll in even Haiti then QX. inflationary

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with a long price normalized forward our little we finally, couple had hold medium QX. just been just some position And what think in then campus And to momentum from home coming to a We for in just new weeks run. Showtime looking of term. to a Our great we're strong Showtime we to reach very our think, actions catch with conditions market ago a more that and has innovation market. much there

helps. hope that So,

wanted follow up not Thanks. is also to better helpful. relates was year-over-year the a whether or the as inflation appreciate sure on of price that I understand kind due or just what I'm you pre-COVID But I bit that. in is I potential -- your little starting to question ability buy and discussed to -- make to the -- than demand I remarks consumer's that, is, demand, to to stuff. are response levels. of the willingness prepared increases your prior to comps. difficult Very heard I prices it dampening impact want rather a and to trying and really new at I get there guess

and Boyd spoke customer during saw we sitting Marco. exact question, a his just Showtime yet. that it's lot about aren't and talked here hearing concern me, we mean, great we beside Boyd? When every asked I about a head. we market it, shaking and about question, Fair, our that We

That's feedback yeah. the fair, That's we've received.

one not on higher had the the be our demand. We customers thing passing -- aren't we the kind dampening we we're know teens, the of that wonder of market, just same. to I of have know I has heard but the have but increases of a to we will disrupt going do a done. mid there's Increases guess,

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a spoke high still level. not not I mean, at the I peak, It's here. out we're so from

So, we really starting yet. here not to not see we're -- we're --

it. Got it. Got

last question And for me. Okay.

competitive that and you little increases a impacting prepared fabric the expand your mattress more through remarks your push ability potentially bit pressures on Can prices in cost segment. maybe called out raise your or some guys seeing? You you're also to what in

it's talked pressures being pass Marco, too. we much through, us., -- I And can to be it. asit's it's competitive able good it. think, about ultimately not smart we timing The of to when are we about when question it tried do when the

So, on we there, get we will it. just lag

our trusted partners. of we're just for So, pressure with in there's China. developing business with Think big dealing most long-term competitive always when customers

in think you you want, add to it over up the chunks we Sometimes, we pricing? just quick do pass Boyd we How about we it as anything ultimately, can't stage and want full facts just where, to periods from did it so immediately. to catch as do not that? it but

impacts Yes. a typically I said take there, any I that. that mean, place, will I you would there's don't just other lag from what that see agree significant with but

it's Yes, about it not much Marco, you it through, get how can it's just quickly passing through.

your time, Got guys. it. Understood. I appreciate

you. Yes, Thank sir.

Marco. you, Thank

any Culp concludes closing session. to back over conference to the for Mr. This I turn like remarks. question-and-answer our would

you, our your your look all interest on a Operator. updating Have day. again, We and next And great progress you quarter. participation to Culp. forward Thank for thank in do you

conference presentation. today's The attending Thank you is concluded. for now

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